SCOTUS Rules on Obamacare Subsidies

We have received the SCOTUS ruling on the Obamacare subsidies. The Supreme Court handed down a 6-3 ruling in favor of the Affordable Care Act in the King v. Burwell case. The case centered on the question of whether the law provided assistance to individuals purchasing health insurance through the federal exchanges as well as state exchanges. The law was written specifically in such a way that tax credits were available for individuals who purchased through “state” run exchanges; however the government argued that the intention of the law was to include federal exchanges as well. Chief Justice John Roberts and Justice Anthony Kennedy ruled with the majority.

The ruling is welcome news for individuals in states like Florida who have purchased plans through the federal exchange and taken advantage of tax credits provided through the law. The tax credits are used to reduce the monthly cost of the insurance plan.

On the other hand, this ruling could be expensive for some small businesses. The penalty for not providing health insurance to employees is increased if the employees receive tax credits to subsidize the cost of their insurance plans purchased from the healthcare exchanges. In his dissent, Justice Scalia wrote that the law should be called “SCOTUScare” after the Supreme Court’s rulings, referring to both this ruling as well as the 2012 ruling in NFIB v. Sebelius, in which the Supreme Court voted 5-4 to affirm the individual mandate.

From a 30,000-foot level, this case creates some issues. From a tax defense standpoint, the profession relies heavily on the letter of the law. On its face, the ruling seems to suggest that there is a higher value in legislative intent than the text of the law itself. Rather than sending the law back to Congress to correct, the Supreme Court decided to interpret the case based on what the government argued that the legislature intended.